Loyalty Today

Imitation As A Source Of Innovation

What was the first fast food company? What was the first credit card company?

If you’re like most people, you probably didn’t know the answers were White Castle and Diners’ Club. While both companies still exist, they now have relatively small share in what has turned out to be very large markets.

In an earlier post, I argued the benefits of the so-called first mover advantage are exaggerated:

While being first in category helps, it doesn’t guarantee success. Atari was the first video game, Visicalc the first desktop spreadsheet, and Mosaic the first Internet browser. None are leaders in their categories. This is not just a technology phenomenon. Gablinger was the first low-calorie beer but lost the market to Miller Lite.

In a book called Copycats, Professor Oded Shenkar takes an even more extreme position: first movers have an inherent disadvantage because they have to pave the way for something new. It’s faster, less risky, and more profitable to imitate. For example, Diners’ Club had to invest considerable time and money convincing consumers to use a plastic card instead of cash. Furthermore, they had to convince merchants to accept these cards and pay a transaction fee. Visa and Mastercard, both of which came later, didn’t have these obstacles.

This idea is not necessarily new. As far back as 1966 noted economist Theodore Levitt claimed in the HBR:

Imitation is not only more abundant than innovation, but actually a more prevalent road to business growth and profits.

Levitt uses IBM (computers), Texas Instruments (transistors), Holiday Inns (motels) and RCA (television) as examples of companies that were successful based on imitation, rather than innovation.

Perhaps, as Shakespeare said, there is nothing new under the sun. Certainly, imitation is more prevalent than innovation and, done well, can be a successful tactic. But I, for one, bet on a core of innovation. And I think you should imitate that.